5. Monopolistic Pricing & Own-Price Elasticity of Demand 1) A monopolist with constant marginal cost is...

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5. Monopolistic Pricing & Own-Price Elasticity of Demand 1) A monopolist with constant marginal cost is producing where el government imposes a quantity tax of $6 per unit of output. If the demand curve facing the monopolist is linear, how much does the price rise? 2) What is the answer to the above question if the demand curve facing the monopolist has constant elasticity? 3) If the demand curve facing the monopolist has a constant elasticity of 2, then what will be the monopolist' s markup on marginal cost? 4) The government is considering subsidizing the marginal costs of the monopolist described in the question above. What level of subsidy should the government choose if it wants the monopolist to produce the socially optimal amount of output? 5. Monopolistic Pricing & Own-Price Elasticity of Demand 1) A monopolist with constant marginal cost is producing where el government imposes a quantity tax of $6 per unit of output. If the demand curve facing the monopolist is linear, how much does the price rise? 2) What is the answer to the above question if the demand curve facing the monopolist has constant elasticity? 3) If the demand curve facing the monopolist has a constant elasticity of 2, then what will be the monopolist' s markup on marginal cost? 4) The government is considering subsidizing the marginal costs of the monopolist described in the question above. What level of subsidy should the government choose if it wants the monopolist to produce the socially optimal amount of output?

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1 To find out how much the price rises due to the quantity tax we need to determine the monopolists pricing behavior and the effect of the tax on the ... View the full answer